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Part of what has made Apple (NASDAQ:AAPL) such a successful company over the years is its ability to adjust to the marketplace. Yes, in some areas they still have a ways to go and yes sometimes that change is small (i.e. every iPhone for the last three years), but it’s hard to argue with the overall results.
For investors, there have been a number of key areas where that decision to pivot has opened up a brand new revenue stream for the company and in 2023 we may see that happen yet again.
First as always, some background.
To dive into why the pivoting trend will continue into 2023 for Apple, you have to look back on what the company did with its streaming services/bundle.
It was one of the worst-kept secrets in Hollywood that Tim Cook wanted to enter the streaming race but the “how” was always a question. It was actually such a big question that the company didn’t really even have a handle on it when it held a big splashy announcement for Apple TV+.
As you may remember, it didn’t go well and between celebrities seeming very confused as to what was happening on stage and the press being baffled as to why the company didn’t give out pricing or a launch date, the whole thing was a mess.
That was then… but now Apple has slowly begun to put that awkward mess behind it. Today, Apple TV+ is the first streamer to have a Best Picture winner at the Oscars and for the past two years has made a huge splash at the Emmys (netting a number of big awards).
And for those who say accolades like that don’t matter – you are wrong – but even setting that aside what Apple has accomplished here is important. The reason is because Apple finally found a way to put into words exactly what its streaming strategy would be to stay competitive…and it worked.
The idea of quality over quantity was the type of pivot it needed to help stand out in a crowded market.
The idea was at (then) $5 a month it didn’t need to be a jack-of-all-trades. They didn’t have to buy a back-catalog to fill up a roster because they felt subscribers were getting fair value for the price. Apple’s team also knew it had a long queue of new series coming and that by having its originals be its catalog it would make its own statement – and be more economically efficient since they weren’t any deals to re-negotiate down the line.
As a result, Apple has reached a point where it could confidently raise the price of the service by a dollar and reduce its free trial from a year to three months.
Apple TV+ also is just one example… the company also expanded into the fitness sector and has slowly begun building that foundation – which also nicely ties into the health push that has become a key area of its Apple Watch line.
Combined, it has been estimated that the total number of paid streaming subscriptions across all areas in 2022 was around $900 million. The breakdown is irrelevant because for Apple streaming has always been a secondary business to fuel its hardware lines. In a sense this is found extra income that isn’t costing them a fortune to produce.
In 2023 we will see that pivot continue as Apple’s push in sports take another turn. Following the deals it made with MLB and MLS, Apple’s partnership with the NFL is about to kick in.
Granted, it’s not the deal people expected.
For a while the thought was that Apple would take over the “Sunday Ticket” package from DirecTV, and while they were seen as the frontrunner, they surprisingly ended up pulling out of the mix. While it was a shock to many (myself included), it really shouldn’t have a been.
It’s the same thing as with Apple TV+ not pursing a catalog.
Apple felt the value wasn’t there.
And its team may have been right.
Apple only wanted “Sunday Ticket” if it could innovate the product, much like what it’s doing with MLS. The problem is that previous deals with the linear broadcasters prohibit any changes of that level to the package. So, while Apple could certainly afford the price tag, it didn’t see the value in shelling out that amount to just do what someone else was already doing.
The other factor here was that Apple had already made a deal with the NFL to take over the rights to the Super Bowl halftime show – at a fraction of the “Sunday Ticket” price. Now it made even less sense for Apple because not only was it still working with the NFL, but it was tied to one of the league’s hallmark events.
Again pivoting.
This also goes beyond streaming.
Remember hardware is the bread-and-butter of Apple and in 2023 we’re expecting to get our first look at the company’s mixed-reality (MR) line of products. The twist here though isn’t what the products can do – it’s the price.
Apple is reportedly looking to charge upwards of $2K to $3K for these products which put them well above the $300 to $400 range that Meta (META) and Sony (SNE) charge for their mainstream VR SKUs and still noticeably higher than the top-level versions in the market overall.
Yes, Apple’s units are more high-tech and potentially may merge virtual reality with augmented reality, but part of the problem with this AR/MR/VR market is that it’s not well defined and has never met its potential.
Putting a premium product at a premium price won’t help that as Apple will be playing to the same early-adopters that shelled out high prices for units over a decade ago. Yet Apple doesn’t seem to care and that’s the pivot here.
Apple is again playing the long game.
When it first introduced iPods and iPhones they also were higher than the traditional prices (granted much lower than here) but they did set the tone of the market. Having Apple in the space also means vast exposure for the concept and that’s the one thing lacking from past launches.
The older VR models didn’t have the name or power of Apple backing it and to use Sony’s headset you initially needed a PlayStation to power the device which limited its possibilities. Additionally, while Meta has made strides with its Quest lines, the headaches that surround Meta in general scared off a number of potentially interested customers.
Apple is essentially treating VR as a new medium as it attempts to take over the space. It doesn’t have to be first, it just has to have a product that’s innovative enough to change the game and the price will take care of itself.
You can doubt Apple – and many will – but this is a company that doesn’t retreat when something isn’t going in the right direction.
It pivots.
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